The number 1 most common reason to have asset protection!
Many states have poor homestead exemptions for your home in a chapter 7 or even a 13 bankruptcy (BK) situation. One of those states is Missouri with a $22,000 exemption. One would think what would $22,000 do for me if the BK Trustee decided to take my home? Well in my opinion, not much, with exception to renting a home. In today's economy it is hard to finance a new home after a BK has been started or even adjudicated and 22,000 may not be enough for a down payment since there are no more 100% loans available. On a $150,000 home you would need $30,000 plus costs for the down payment.
If you put your home into a trust prior to any foreseeable creditor problems, even if you have a mortgage, so long as you do this without what is considered fraudulent conveyance, the trust will prevent the BK Trustee from taking the home under 11 USC sec. 541(b)(1).
11 USC sec. 541“(b) Property of the estate does not include—
(1) any power that the debtor may exercise solely for the benefit of an entity other than the debtor;”
Fraudulent conveyance are considered as moving assets from you to someone else or to another entity after a creditor has made you aware they intend to sue you for the money owed or in some cases after the amount owed became due.
To get full BK protection under 11 USC sec. 541(b)(1) you must fully disclose the trusts.